Cabinet Decision No. 149 of 2026 was issued on 1 September 2026. It amends Cabinet Decision No. 52 of 2017, the Executive Regulation of Federal Decree-Law No. 8 of 2017 on VAT. Most of the amendments took effect on 1 October 2026.
This note covers those live changes: how a bundled supply is classified, when employee costs can be recovered, cash purchases, the profit margin scheme, the test for a person outside the UAE, medical products, capital assets, and the wording on a tax credit note.
The decision also rewrites the standard method for residual VAT credit. That rule does not start on 1 October. It starts with the first tax year beginning after 1 October 2027. The mechanics of that recovery percentage are in a separate note, New regulations for availing VAT credit under Cabinet Decision No. 149 of 2026.
If you file a VAT return this quarter, the items below are the ones already in force.
Bundled supplies follow the substance of the deal
New Article 4(6) stops a taxable person treating a supply of more than one component as several supplies, where the nature and economic substance show the components are interconnected and cannot be separated. In that case it is a single composite supply, and it takes the VAT treatment of the principal component.
Earlier versions of Article 4 put weight on whether each component had its own price. Separate prices and separate invoice lines are still evidence. They no longer decide the question by themselves. The Federal Tax Authority can look at whether the parts actually stand apart in the commercial deal.
This matters where a package mixes standard-rated, zero-rated, and exempt elements. A property contract with fit-out, a healthcare package, a software licence sold with support, a school fee that bundles an exempt education supply with a taxable extra: if the customer cannot sensibly take one part without the others, the whole supply follows the principal component.
Review the contract and the invoice before the next billing run. If you have been splitting a single commercial deal across lines to reach a better VAT answer, write down why each component can be bought and used on its own. If you cannot, the new clause treats it as one supply.
Employee benefits, and a specific rule for accommodation
Article 53(1)(c) is the blocked-input-tax rule for goods and services provided free of charge to employees for their personal benefit. Decision 149 rewrites the two exceptions that let you recover in some of those cases.
Legal obligation. Input tax is recoverable where providing the benefit is mandatory under applicable labour legislation. The old text referred to labour law in a designated zone. The new text covers labour legislation in any free zone, financial or non-financial, as well as on the mainland. That removes a doubt about free zones that are not designated zones.
Accommodation is carved out of this exception. Employer-provided housing qualifies on the legal-obligation route only where a decision or directive of the Ministry of Human Resources and Emiratisation requires you to provide it. Housing you offer because the market expects it, or because the offer letter includes it, does not get through on this route.
Contract or documented policy. Recovery where the benefit is a contractual obligation, or sits in a documented HR policy, now depends on cases and conditions the FTA will specify. The old test, that the benefit lets the employee perform the role and reflects normal business practice, has been replaced by that FTA specification. The specification is not out yet. Keep the contracts and the policies. Do not treat them as a finished recovery position until the FTA publishes the conditions.
Utilities, furniture, and maintenance on staff housing are not rewritten by this clause. Test each cost on its own. The FTA's public clarification on labour accommodation, residential versus serviced property, still applies. A qualifying residential building may be an exempt supply in the landlord's hands, while serviced or non-residential accommodation, and some associated costs, can still carry VAT. Look at the contract for each property, not at a single "staff housing" code in the ledger.
Cash payments above a threshold the Minister has not set
New Article 54(3) of the Executive Regulation blocks input tax on a supply whose value exceeds an amount the Minister will specify, where the consideration is paid or intended to be paid in cash. The block is subject to the controls in that Ministerial decision.
The decision that sets the amount is not published yet. There is no figure to code into accounts payable today.
The direction is already clear. It sits alongside the FTA's push toward traceable payments and supplier checks. Once the threshold exists, a purchase above it that you settle in cash, or intend to settle in cash, loses the input tax. "Intended to be paid" means a plan to pay cash can be enough. You do not get to recover the VAT and switch the payment method later.
What you can do now is list where cash still moves: petty cash, site payments, supplier settlements, deposits. When the Ministerial decision lands, the control has to sit at posting, with the payment method and the threshold on the same screen as the VAT code.
Margin scheme costs cannot do two jobs
Article 29(5) amends the purchase price used under the profit margin scheme. Costs and fees incurred to acquire the eligible goods still enter that purchase price, but only where the input tax on those costs or fees is not recoverable under Article 54 of the VAT Decree-Law.
The old wording brought acquisition costs into the purchase price without tying that treatment to whether you had already recovered the VAT. A dealer could recover the input tax on a fee and also add the fee to the purchase price, which shrinks the taxable margin. The amendment stops that double use of the same cost.
If you sell second-hand goods, antiques, or collectors' items under the margin scheme, each acquisition cost now needs a flag: recovered, or not recovered. Only the unrecovered costs go into the purchase price. The record has to survive an audit, invoice by invoice, not as a year-end estimate.
Less than a month now means less than 30 days
Article 52(2) is the test for treating a person as outside the UAE when you look at input tax recovery connected with certain exempt supplies, including exported financial services. The old text used a presence of less than a month. The new text uses less than 30 days, and that presence still must not be effectively connected with the supply.
A calendar month can be 28, 30, or 31 days. The count is now a count of days. If your procedure still says "under a month", change it. A stay of 30 days or more fails the test. A shorter stay still fails if the person is in the UAE in connection with the supply itself.
One label for medical products
Article 41(4) replaces the separate categories of pharmaceutical products and medical equipment with a single category: medical products specified in a Cabinet decision. Goods supplied in the course of providing zero-rated healthcare services, where those goods are necessary for the services, stay capable of zero-rating under the other limb of the clause.
The practical scope still depends on the Cabinet list. If the item master, the tax code, or the import classification still uses the two old labels, map them to "medical product" and to the list. A product does not stay zero-rated because the old name is still on the SKU.
A capital asset is the asset, not the invoice
Article 57(1) defines a capital asset as a business asset with a cost of AED 5 million or more, excluding tax. The previous words were "a single item of expenditure" of that amount. The threshold did not change. Buildings and parts of buildings still need a useful life of at least 10 years. Other capital assets still need at least 5 years. VAT must still be payable on the asset. The clause now points expressly to the Capital Asset Scheme in Articles 12 and 60 of the Decree-Law.
The shift is from the bill to the asset. Several invoices, or several stages of a fit-out, do not by themselves create several items sitting under AED 5 million. If the underlying asset costs AED 5 million or more and meets the life test, it belongs on the Capital Asset Scheme register, and the adjustments over the following years still apply.
Walk the fixed-asset register and any live projects near the threshold. Match cost to the asset, not to how the contractor cut the invoices.
The credit note has to say Tax Credit Note
Article 60(1)(a) was a drafting error. It required the words "Tax Credit Note" to appear on the invoice. The amended text requires those words on the credit note. The other content requirements in Article 60(1), from the supplier's details through to the tax amount, are unchanged.
Open the credit-note template in the accounting system and read the title. If it says "Credit note", "Credit memo", or nothing in particular, change it. This is a short fix, and it is already in force.
What to fix on the next return
These are file and system checks, not a change to the recovery percentage:
- Review bundled contracts. Where the parts cannot be separated in substance, one VAT treatment applies, and it follows the principal component.
- Split employee costs into legally required benefits, accommodation, and anything that rests on a contract or an HR policy. Accommodation needs a MoHRE decision or directive if you want the legal-obligation exception. Contractual benefits wait on the FTA's conditions.
- List purchases you still settle in cash, so the Ministerial threshold has somewhere to land.
- If you use the margin scheme, mark each acquisition cost as recovered or not recovered before it enters the purchase price.
- Map healthcare items to the Cabinet list of medical products.
- Confirm assets at or above AED 5 million are on the Capital Asset Scheme register as assets, not as a stack of invoices.
- Confirm credit-note templates display "Tax Credit Note".
The recovery-percentage change is the other half of Decision 149, and it has its own date. If exempt supplies are a real part of the business, read that note next and run the model before the tax year that begins after 1 October 2027.
If you want the October items checked against the contracts, the HR file, and the templates you actually use, that is work we do. Start with the supplies you bundle and the costs you still pay in cash.
